Demand for new cars in Europe plungest to lowest since 1995

There’s not much hope for mass market automakers in Europe for this year even as they attempt to reduce factory capacity and offer heavy discounting. Their margins will continue to drop from 2012, which marks a 17-year low for the demand for new cars in Europe that seems to be headed to a recession. Registration data released on Wednesday also showed the biggest annual drop since a 16.9% downturn in 1993, highlighting the crisis for automakers in Europe. Consumers are fretting over austerity measures, job security and rising living costs, and those who want to buy new cars are struggling to secure credit. The European automotive industry association ACEA said that even Volkswagen’s sales dropped. But Hyundai and Kia proved that it’s possible to increase sales even during a downturn.

According to Peter Fuss, senior advisory partner at Ernst & Young's Global Automotive Center, the practice of registering new cars before selling them with huge discounts as used vehicles would boost sales figures. Fuss said that since sales figures for the year were artificially inflated because of self-registrations by dealers and automakers, especially in Germany, the actual drop in sales is much worse.

Mass market carmakers have been terminating workers in plants throughout Europe that are operating below capacity. Renault announced job losses after Honda, Ford, PSA Peugeot Citroen and Opel all did. ACEA divulged that new car registrations declined by 8.2% to 12.05 million vehicles in 2012, the lowest level since 1995. It also said that losses in all major euro zone economies, combined with two fewer working days on average, resulted to a 16.3% drop in European Union registrations last month to 799,407 vehicles. This represented the worst drop in 26 consecutive months or since October 2010.